Alex Tabarrok, over at the econ blog Marginal Revolution, has been discussing truck rental at companies such as UHaul. Not surprisingly, if you've ever dealt with car-rentals, the pricing is similarly cryptic. Furthermore, and Alex doesn't discuss this, both the truck rental and the car rental markets have difficulty ensuring availability of the truck that you want, or that the advertised price has any relationship to the price you end up paying. Those $19/day prices if you stay in town? Pure fantasy:
Why is it so more expensive to rent a UHaul van to travel from LA to Las Vegas ($454) than from Vegas to LA ($119) (more here). Since the direct cost is similar the first thing an economist might think of is price discrimination. But the rental market is highly competitive, especially when we take into account substitutes such as train, private car etc., so that seems like a non-starter. A good answer needs to recognize that UHaul operates a network with significant inter-customer externalities.
Let us suppose that as the day dawns UHaul has the optimal number of trucks at each of its locations. At the end of the day, UHaul would like the same number of trucks at each of its locations. But this is possible only if departures equal arrivals and to help achieve that balance UHaul lowers the price on the low demand Vegas to LA trip and raises it on the high demand Vegas to LA trip. (It's more complicated than this because there are many more than bi-directional considerations but you get the idea.)
Put differently, a customer who travels from Las Vegas to LA reduces the cost to UHaul of running its network because it lets UHaul sell an LA to Las Vegas trip. The direct costs may be similar but the indirect costs related to running the network are very different. UHaul's pricing strategy reflects both the direct and indirect costs.
See, there's certainly a logic to their pricing, and it would appear that this is efficiency maximizing, but what the airlines have learned, is that there's an unseen cost to customer confusion. When companies like Southwest and jetBlue began to offer simple straightforward pricing they quickly gained on their competitors. Sure some routes will be less profitable than others, and some prices won't be as competitive as they should be, but the whole flying experience is much better.
Someone, perhaps a subsidiary of jetBlue even, needs to disrupt the car and truck rental industry. Or , if you have a lot of money, but don't have the time, I'd be glad to send you a business proposal.
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